Sunday, February 28, 2010

I always love to get questions from my readers, and I answer them all, but sometimes I feel like the “Dear Abby’ for entrepreneurs. Many of the questions I get make me realize how well off most of us are, as we understand the challenges that others have to face. If you have some insights, don’t hesitate to let me know. Here are some real cases:

Dear StartupPro,

I am a minority looking for funding for a Home HealthCare Service business. It has been hard in my years of searching for funds. I have had some unfortunate trying times with the loss of a daughter and baby grandson and having to raise a now 17-year-old, we are upside down in our mortgage. We were taken for our money in trying to straighten out credit cards, had good credit, but my husband and I and now have nothing, and just need some special person to help me out.

I am a young senior educated in Business Administration, with more than 15 years in the HealthCare and Financial Service business. I have developed a Non-Profit and a For-Profit HealthCare and Home Care Agency, and I have an Executive Summary and Business Plan. I am looking for funding of $50K in startup funds, and would like to partner with the right investor to provide this and other future funding as needed.

Thank You, God Bless – UNFORTUNATE TRYING TIMES

Dear Unfortunate,

I understand your situation, and unfortunately I don’t have any easy answers for you. I actually recommend that you consider working for an existing home healthcare service business until you get back on your feet.

Working for a similar existing business will give you experience, credibility, and connections, and then allow you to strike out more successfully on your own later. You will find that investors don’t often invest in a services business, since there are no assets for equity, and banks don’t lend money to someone with no credit and a mortgage problem.

Dear StartupPro,

My husband was in the title business for 16 years, and then became a technology educator. He has a Masters in his education field. He’s at retirement age but wants to start a dropout prevention or GED school. We live in East Texas were the education level is low and dropout rates are around 17%. I am retired but formerly have been a marketing director and involved in CPA financial services.

I have been reading your articles but wonder with our type of dream the same rules apply since it would be tied into the government. Where to start for funding and does a business plan differ?

Thank you. Respectfully, WHERE TO START

Dear Where-To-Start,

The type of business you describe is sorely needed, but sounds like it may really be a non-profit. Either way, I would recommend that you start by finding a local SCORE (small business mentoring) or SBA (Small Business Administration) office in your area, and talking to them. There are many other resource sites available, like Digital.com.

The business plan expectations are essentially the same for both non-profits and for-profits. In your situation, you may be able to qualify for some kind of a government grant, or certainly a loan. You may have less luck getting an equity investor interested, since the financial returns would likely be low.

Dear StartupPro,

My question is how to treat a valuable domain name during the funding stage? My initial thought was to place a value on the name and lease it to the company with the option to buy after a pre-determined number of years.

I would like my sweat equity and existing IP to be the risk that I incur without also risking an asset that could easily represent the majority of my total assets. By separating the name in a lease arrangement, I was also hoping to be able to offer greater equity to a potential co-founder and early employees.

Sincerely – VALUABLE DOMAIN NAME

Dear Valuable-Domain-Name,

I would recommend that you put the domain name into the valuation for your company.I think you will need it in to get an investor, and keep the equity percent required down to a reasonable level.

Without the domain name, your valuation may be too low to justify the investment amount you need. In addition, investors are always wary of entrepreneurs who seem to be trying to minimize their risk, meaning trying to move risk to the investor.---------------------------------------------

These are real requests from the past couple of weeks, with some masking to protect privacy. You might have faced similar situations, and would like to share how you handled things Let’s work together to provide the best guidance possible. If we help each other, then we all win.

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